The Ongoing Conflict Between Money and Emotions


For the last few years, we've heard that we need to have more grown-up conversations about the country's financial situation. But these adult conversations often fail to acknowledge how we actually feel about money. In theory, making sacrifices and lowering government debt seems logical until it comes to a program that affects us directly. Then we feel conflicted. Logically, we know what should happen, but emotionally we're torn.

We often do the same thing when it comes to personal finance.

We may know that it's time to get serious about money, but nobody accounts for our emotions when trying to whip us into shape. Part of how we feel about money is the sense of security that can come with it. Our personal sense of security has a lot to do with trust, and trust is often a function of reliability. Recent events, however, are forcing us to ask questions about whom we can trust and what we can rely on in a way that we may not be fully prepared for.

"The heart of the problem," said one retiree in a New York Times story that ran in 2011, "is the rapid change that has left Americans confused, disoriented and struggling to adapt." Institutions we believed were worth trusting, like our employers, banks, and states, have made changes that undermine that trust.

That emotions don't fit on a spreadsheet is one of the great paradoxes of personal finance. We often have an expectation that making good money decisions is a function of opening up Excel and making a formula or model. But good financial decisions require more than a spreadsheet. They also require that we understand our own behaviors and our emotional response to money.

We may want financial decisions to be a function of a mathematical equation, but the reality we face is less straightforward. Often we have two potential answers to the financial decision we're trying to make: the spreadsheet answer and the "allow me to sleep at night" answer.

So we are not cold and removed from emotion. If that were the case, we wouldn't feel a twinge when we have to tell a child that we can no longer afford a special treat. And if we were that removed, we'd avoid heated arguments with spouses about shrinking family budgets. It would be easy, since it's only money, right?

There will be times when you may have to make financial decisions that don't make sense on a spreadsheet, but they may allow you to sleep at night. How much is a good night of sleep worth to you?

That said, we can't always make every decision that lets us sleep better. That could be a quick way to undermine financial security, which would only lead to more sleepless nights. In the conversations I've heard of on the topic, however, there's more acknowledgment that both kinds of answers exist. Knowing this fact can help us adapt as we engage in the give and take between our spreadsheets and our hearts.

A version of this post appeared previously at The New York Times.

Carl Richards is a financial planner and the director of investor education for the BAM ALLIANCE, a community of more than 130 independent wealth management firms throughout the United States. Visit Behavior Gap for more of Carl's sketches and writings.

The Motley Fool has a disclosure policy.

The article The Ongoing Conflict Between Money and Emotions originally appeared on

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.